Nasdaq Index, Dow Jones, S&P 500 News: Inflation Surge Shakes Market Confidence in Rate Cuts
Inflation Data Surpasses Expectations
Consumer price inflation in January rose by 0.3%, with the annual rate reaching 3.1%, exceeding forecasts. These figures surpassed the predictions of a 0.2% monthly increase and a 2.9% annual rate, igniting concerns about persistent inflation.
Rate Cut Outlook Dims
The prospect of the Federal Reserve cutting rates several times in 2024 is now less certain, contributing to the bearish sentiment in the equity market. The CME FedWatch Tool indicates a mere 36.6% chance of a rate cut in May, a steep drop from 52.2% just a day earlier. The likelihood of rates remaining steady has risen to 60.8%.
Yield Predictions and Tech Sector Impact
Some investors anticipate 10-year Treasury yields climbing above 5.00%. The tech sector, a major driver of recent market highs, was notably impacted. Shares of major tech companies like Nvidia, Microsoft, and Amazon led the losses, with Amazon dropping 3%, and Nvidia and Microsoft both falling by 2%.
Upcoming Economic Data
Attention is now turning to upcoming economic releases, including January retail sales and the producer price index, which could further influence market movements.
Short-term Market Forecast
In the short term, the market is likely to remain under pressure due to these inflation concerns and the evolving interest rate outlook. Investors should prepare for continued volatility, especially in sectors sensitive to interest rate changes. The upcoming economic data will be critical in shaping market expectations.